Brunei Darussalam - Tips

Brunei Darussalam
Bureau of East Asian and Pacific
Affairs
May
2007

Background Note: Brunei
Darussalam

Flag of Brunei is yellow with two diagonal bands of white (top) and
black starting from the upper hoist side; the
national emblem in red
is
superimposed at the center; the emblem includes a swallow-tailed flag on top
of a winged column within an upturned crescent above a scroll and
flanked by two upraised
hands.

Government
Type: Malay Islamic
Monarchy.
Independence: January 1,
1984.
Constitution:
1959.
Branches: Executive--Sultan is both head of state and Prime
Minister, presiding over a
fourteen-member cabinet. Legislative--a Legislative Council has been
reactivated after a 20-year suspension to play an advisory role for
the Sultan. Judicial (based on Indian penal code and English common
law) --magistrate's courts, High Court, Court
of Appeals, Judicial Committee of the Privy Council (sits
in
London).
Subdivisions: Four districts--Brunei-Muara, Belait, Tutong, and
Temburong.

PEOPLE
Many cultural and linguistic differences make Brunei Malays distinct
from the larger Malay populations in nearby Malaysia and Indonesia,
even though they are ethnically related and share the Muslim
religion.

Brunei has hereditary nobility, carrying the title Pengiran. The
Sultan can award to commoners the title Pehin, the equivalent
of a life peerage awarded in the United Kingdom. The Sultan also can
award his subjects the Dato, the equivalent of a knighthood in
the United Kingdom, and Datin, the equivalent of
damehood.

Bruneians adhere to the practice of using complete full names with
all titles, including the title
Haji (for men) or Hajah (for women) for those who have made the Haj
pilgrimage to Mecca. Many Brunei Malay women wear
the tudong, a traditional head
covering. Men wear the songkok, a traditional
Malay cap. Men who have completed the Haj can wear a white
songkok.

The requirements to attain Brunei citizenship include passing tests
in Malay culture, customs, and language. Stateless permanent
residents of Brunei are given International Certificates of
Identity, which allow them to travel
overseas. The majority of Brunei's Chinese are permanent residents, and many
are stateless. An amendment to the National Registration and
Immigration Act of 2002 allowed female Bruneian citizens for the
first time to transfer their nationality to their
children.

Oil wealth allows the Brunei Government to provide the population
with one of Asia's finest health care systems. Malaria has been
eradicated, and cholera is virtually nonexistent. There are
five general hospitals--in Bandar Seri Begawan, Tutong,
Kuala Belait, Bangar, and Seria--and there are numerous
health clinics throughout the
country.

Education starts with preschool, followed by 6 years of primary
education and up to 7 years of secondary education. Nine years of
education are mandatory. Most of Brunei's college students attend
universities and other institutions abroad, but approximately 3,674
(2005) study at the University of Brunei
Darussalam. Opened in 1985, the university has a faculty of more than
300 instructors and is located on a sprawling
campus overlooking the South China
Sea.

The official language is Malay, but English is widely understood and
used in business. Other languages spoken are several Chinese
dialects, Iban, and a number of native dialects. Islam is
the official religion, but religious freedom
is guaranteed under the
constitution.

HISTORY
Historians believe there was a forerunner to the present Brunei
Sultanate, which the Chinese called Po-ni. Chinese and
Arabic records indicate that this ancient trading kingdom existed at
the mouth of the Brunei River as early as the seventh or eighth
century A.D. This early kingdom was
apparently conquered
by the Sumatran Hindu Empire of Srivijaya in the early
ninth century, which later
controlled northern Borneo and the Philippines. It was
subjugated briefly by the Java-based Majapahit Empire but soon regained
its independence and once again rose to
prominence.

The Brunei Empire had its golden age from the 15th to the 17th
centuries, when its control extended over the
entire island of Borneo and north into the Philippines. Brunei was
particularly powerful under the fifth sultan, Bolkiah (1473-1521), who
was famed for his sea exploits and even briefly captured
Manila; and under the ninth sultan, Hassan (1605-19), who fully
developed an elaborate Royal Court structure, elements of which
remain
today.

After Sultan Hassan, Brunei entered a period of decline due to
internal battles over royal succession
as well as the rising influences of European colonial
powers in the region that, among other things, disrupted traditional
trading patterns, destroying the economic base of Brunei and many
other Southeast Asian sultanates. In
1839, the English adventurer James Brooke
arrived in Borneo and helped the Sultan put down a rebellion. As a reward,
he became governor and later "Rajah" of Sarawak in northwest Borneo
and gradually
expanded the territory under his
control.

Meanwhile, the British North Borneo Company was expanding its control
over territory in northeast Borneo. In 1888, Brunei
became a protectorate of the British Government, retaining
internal independence but with British control over external affairs.
In 1906, Brunei accepted a further measure of British control when
executive power was transferred to a British resident,
who advised the ruler on all matters
except those concerning local custom and
religion.

In 1959, a new constitution was written declaring Brunei a
self-governing state, while its foreign affairs,
security, and defense remained
the responsibility of
the United Kingdom. An attempt in 1962 to introduce
a partially elected legislative body
with limited powers was abandoned after the opposition
political party, Parti Rakyat Brunei, launched an
armed uprising, which the
government put down with the help of British forces. In the
late 1950s and early 1960s, the government also resisted pressures
to join neighboring Sabah and Sarawak in the newly
formed Malaysia. The Sultan eventually decided that Brunei
would remain an independent
state.

In 1967, Sultan Omar abdicated in favor of his eldest son, Hassanal
Bolkiah, who became the 29th ruler. The former Sultan remained as
Defense Minister and assumed the royal title Seri Begawan. In 1970,
the national capital, Brunei Town, was renamed Bandar Seri
Begawan in his honor. The Seri Begawan died in
1986.

On January 4, 1979, Brunei and the United Kingdom signed a new treaty
of friendship and cooperation. On January 1,
1984, Brunei Darussalam became a fully independent
state.

GOVERNMENT AND POLITICAL
CONDITIONS
Under Brunei's 1959 constitution, the Sultan is the head of state
with full executive authority, including emergency powers since
1962. The Sultan is assisted and advised by five
councils, which he appoints. A Council of
Ministers, or cabinet, which currently consists of 14 members
(including the Sultan himself), assists in the administration of the
government. The Sultan presides over the cabinet as Prime Minister
and also holds the positions of Minister of Defense and
Minister of Finance. His son, the Crown Prince,
serves as Senior Minister. One of the Sultan's brothers, Prince
Mohamed, serves as Minister of Foreign
Affairs.

Brunei's legal system is based on English common law, with an
independent judiciary, a body of written common law
judgments and statutes,
and legislation
enacted by the sultan. The local magistrates' courts try most
cases. More serious cases go before the High Court, which sits for
about 2 weeks every few months. Brunei has an arrangement
with the United Kingdom whereby United Kingdom
judges are appointed as the judges for Brunei's High Court and
Court of Appeal. Final appeal can be made to the Judicial Committee of
the Privy Council in London in civil but not criminal cases. Brunei also
has a separate system of Islamic courts that apply Sharia law in
family and other matters involving
Muslims.

The Government of Brunei assures continuing public support for the
current form of government by providing economic benefits
such as subsidized food, fuel, and housing; free
education and medical care; and low-interest loans for
government employees. The Sultan said in a 1989 interview that
he intended to proceed,
with prudence, to establish more liberal institutions in the country
and that he would reintroduce elections and a legislature when he
"[could] see evidence of a genuine interest in politics on the part of
a responsible majority of Bruneians." In
1994, a constitutional review
committee submitted its findings to the Sultan, but these have not
been made public. In 2004 the Sultan re-introduced an appointed
Legislative Council with minimal powers. Five of
the 31 seats on the Council are indirectly
elected by village
leaders.

Brunei's economy is almost totally supported by exports of crude oil
and natural gas. The government uses its
earnings in part to build up its foreign reserves, which at one time
reportedly reached more than $30 billion. The
country's wealth, coupled with its membership in the United
Nations, Association
of Southeast Asian Nations (ASEAN), the Asia Pacific Economic
Cooperation (APEC) forum, and the Organization of the Islamic
Conference give it an influence in the world disproportionate to its
size.

Brunei Darussalam maintains an embassy in the United States at
3520
International Court, NW, Washington, DC 20008; tel.
202-237-1838.

ECONOMY
Brunei's economy has enjoyed moderate growth in the mid-2000s,
primarily due to high world oil and gas prices. At 3.7% GDP growth in
2006, Brunei had the lowest rate of any ASEAN member nation. Weak oil
prices, the East Asian financial
crisis, and the collapse of the Amedeo Development Corporation all
contributed to very low growth rates in the late 1990s and early
2000s.

Brunei is the fourth-largest oil producer in Southeast Asia,
averaging about 219,000 barrels a day in 2006. It also is the
ninth-largest exporter of liquefied
natural gas in the world. Like many oil producing
countries, Brunei's economy has
followed the swings of the world oil market. Economic
growth has averaged around 2.8% in the 2000s, heavily dependent on oil
and gas production. Oil production has averaged around
200,000 barrels a day during the 2000s, while
liquefied natural gas output has been slightly under or over 1,000
trillion btu/day over the same period. Brunei is estimated to
have oil reserves expected to last 25 years, and enough natural gas reserves
to last 40
years.

Brunei Shell Petroleum (BSP), a joint venture owned in equal shares
by the Brunei Government and the Royal Dutch/Shell group
of companies, is the chief oil and gas production company in Brunei.
It also operates the country's only refinery. BSP and four sister
companies--including the liquefied natural gas producing firm
BLNG--constitute the largest employer in Brunei after
the government. BSP's small refinery has a
distillation capacity of 10,000
barrels per day. This satisfies domestic demand for most petroleum products.

The French oil company Total (then known as ELF Aquitaine) became
active in petroleum exploration in Brunei in the 1980s. The
joint venture Total E&P Borneo BV currently
produces approximately 35,000 barrels per day and 13% of Brunei's
natural
gas.

In 2003, Malaysia disputed Brunei-awarded oil exploration concessions
for offshore blocks J and K (Total and Shell
respectively), which led to the Brunei
licensees ceasing exploration activities. Negotiations between the two
countries are continuing in order to resolve the conflict. In 2006,
Brunei awarded two on-shore blocks--one to a Canadian-led
and the other to a
Chinese-led consortium. Australia, Indonesia, and Korea were the
largest customers for Brunei's oil exports,
taking over 67% of Brunei's total crude exports. Traditional
customers Japan, the U.S., and China each took around 5% of total
crude
exports.

Almost all of Brunei's natural gas is liquefied at Brunei Shell's
Liquefied Natural Gas (LNG) plant, which opened in 1972 and is
one of the largest LNG plants in the world. Some 90% of
Brunei's LNG produced is sold to Japan under a long-term agreement
renewed in 1993. The agreement calls for Brunei to
provide over 5 million tons of LNG per year to three Japanese
utilities, namely to TEPCo, Tokyo Electric
Power Co. (J.TER or 5001), Tokyo Gas Co.
(J.TYG or 9531) and Osaka Gas Co. (J.OSG or 9532). The Japanese
company, Mitsubishi, is a joint venture
partner with Shell and the Brunei Government in Brunei LNG,
Brunei Coldgas, and Brunei Shell Tankers, which
together produce the LNG and supply it
to Japan. Since 1995, Brunei has supplied more than 700,000 tons of
LNG to the Korea Gas Corporation (KOGAS) as well. In
1999, Brunei's natural gas production reached 90 cargoes per day. A
small amount of natural gas is used for domestic
power generation. Since 2001, Japan remains
the dominant export market for natural gas. Brunei is
the fourth-largest exporter of LNG in
the Asia-Pacific region behind Indonesia, Malaysia, and
Australia.

The government sought in the past decade to diversify the economy
with limited success. Oil and gas
and government spending still account for most of Brunei's
economic activity. Brunei's non-petroleum industries
include agriculture, forestry, fishing,
aquaculture, and banking.
The
garment-for-export industry has been shrinking since the U.S.
eliminated its garment quota system at the end of 2004. The Brunei
Economic Development Board announced plans in
2003 to use proven gas reserves to
establish downstream
industrial projects. The government plans to build a power plant
in the Sungai Liang region to power a proposed aluminum smelting
plant that will depend on foreign investors. A second major
project depending on foreign investment is in the planning stage: a
giant container hub at the Muara Port
facilities.

The government regulates the immigration of foreign labor out of
concern it might disrupt Brunei's society. Work permits for
foreigners are issued only for short periods and must be
continually renewed. Despite
these
restrictions, the estimated 100,000 foreign temporary residents of
Brunei make up a significant portion of the work
force. The government reported a total work force of
180,400 in 2006, with a derived unemployment rate of
4.0%.

Oil and natural gas account for almost all exports. Since only a few
products other than petroleum are produced locally, a wide variety of
items must be imported. Nonetheless, Brunei has had a
significant trade surplus in the 2000s.
Official statistics show Singapore, Malaysia, Japan, the U.S., and the
U.K. as the leading importers in 2005. The United States was
the
third-largest supplier of imports to Brunei in
2005.

Brunei's substantial foreign reserves are managed by the Brunei
Investment Agency (BIA), an arm of the Ministry of
Finance. BIA's guiding principle is to increase the real value
of Brunei's foreign reserves while pursuing a
diverse investment strategy, with holdings in the United States,
Japan, Western Europe, and the
Association of Southeast Asian Nations
(ASEAN)
countries.

The Brunei Government encourages more foreign investment. New
enterprises that meet certain criteria can receive
pioneer status, exempting profits from income tax for up to 5 years,
depending on the amount of capital invested. The normal
corporate income tax rate is 30%. There is no personal income tax or
capital gains
tax.

One of the government's priorities is to encourage the development of
Brunei Malays as leaders of industry and commerce. There are no
specific
restrictions of foreign equity ownership, but local participation,
both shared capital and management, is
encouraged. Such participation helps when tendering for
contracts with the government or Brunei Shell
Petroleum.

Companies in Brunei must either be incorporated locally or registered
as a branch of a foreign company and must be registered
with the Registrar of Companies. Public
companies must have a minimum of seven
shareholders. Private companies
must have a minimum of two but not more than
50
shareholders. At least half of the directors in a company must be
residents of
Brunei.

The government owns a cattle farm in Australia through which the
country's beef supplies are processed. At 2,262 square
miles, this ranch is larger than Brunei itself. Eggs and chickens are
largely produced locally, but most of Brunei's other food
needs must be imported. Agriculture, aquaculture, and
fisheries are among the industrial sectors that the government has
selected for highest priority in its efforts to diversify the
economy.

Recently the government has announced plans for Brunei to become
an
international offshore financial center as well as a center for
Islamic banking. Brunei is keen on the
development of small and medium enterprises and also is
investigating the possibility of establishing a "cyber park" to
develop an information technology industry. Brunei has also
promoted ecotourism
to take advantage of the over 70% of Brunei's territory
that remains primal tropical
rainforest.

DEFENSE
The Sultan is both Minister of Defense and Supreme Commander of the
Armed Forces (RBAF). All infantry, navy, and air
combat units are made up of
volunteers. There are two infantry battalions equipped with
armored
reconnaissance vehicles and armored personnel carriers and supported
by Rapier air defense missiles and a
flotilla of coastal patrol vessels armed with
surface-to-surface missiles. Brunei has ordered, but not yet
taken possession of, three offshore
patrol vessels from the
U.K.